Reporting Season - Debt restructure to give Force new life

Friday 24th August 2001

By Deborah Hill Cone

Sky City is confidently claiming it can still see profitable "synergies" with Force Corporation, although it remains vague about what those are.

Force Corporation, which is 50.2% owned by Sky City, this week reported a loss of $47.5 million for the year to June.

It wrote down $43.9 million, with $39 million relating to the company's distressed Argentinian investment, Village Cinemas S. A. The Argentinian company is a joint venture with a local businessman and Village Roadshow cinemas of Australia.

Sky City managing director Evan Davies told a briefing to announce the casino operator's record profit of $68.3 million that Force's capital structure was to be restructured.

"Once the restructuring has been completed Force will be able to maximise its strong position in New Zealand without the pressure of having to support an onerous debt-repayment regime out of Argentina," Mr Davies said.

Force had renegotiated a new term facility with ANZ Banking Group for its New Zealand operations and it was well-advanced in negotiating a replacement debt facility for Argentina.

New equity of $30 million would enable Force to continue its strategies in New Zealand and to contribute its share of the initial reduction of the Argentina debt balance.

Mr Davies said the magnitude of debt post-restructure would be half the current levels. He said the debt would continue to be denominated in US dollars.

The Argentinian currency, the peso, is pegged dollar-for-dollar with the US dollar, but if Argentina devalued its currency it could leave Village Cinemas in a difficulty position, having peso receipts to pay off US-denominated debt.

However, analysts are comfortable with Sky City's exposure given it has made no debt guarantees and also that the investment is a small one.

The synergies between Force and Sky City are expected to include cross-marketing to cinema and casino punters and using the Force Entertainment Centre to draw people to the city - and up the road to have a flutter at Sky City.

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